ICSID dismisses claim of Israeli company against Uzbekistan

ICSID Dismisses Claim of Israeli Company against Uzbekistan

The International Centre for Settlement of Investment Disputes (ICSID) based in Washington, D.C. considered a claim filed by Metal-Tech Ltd, an Israeli company, against Uzbekistan.

The said claim has read that Uzbekistan had allegedly breached its obligations in terms of protecting foreign investments under the Agreement between the Government of the State of Israel and Government of the Republic of Uzbekistan for the Promotion and Reciprocal Protection of Investments signed in 1994.

The cooperation which has ended in a court hearing started in 2000 when Metal-Tech Ltd jointly with Almalyk Mining and Metallurgy Combine and Uzbek Refractory and Resistant Metals Integrated Plant (“UzKTJM”) founded the Uzmetal Technology Joint Venture on processing of molybdenum products.

On the basis of laws of the Republic of Uzbekistan “On Foreign Investments” and “On Guarantees and Measures of Protection of Foreign Investors”, as well as a number of decrees of President of the Republic of Uzbekistan and the country’s government, Metal-Tech Ltd received the appropriate preferences. In their turn, the Israeli businessmen assumed investment commitments, including introduction of the new molybdenum products manufacturing methods.

However, in the course of cooperative engagement the Israeli company didn’t introduce any technologies into the UzKTJM and didn’t deliver necessary raw molybdenum to the Uzbek plant which has led to the no fulfillment of production manufacturing targets. Due to the negligent approach of the company’s foreign founders towards their obligations, the blatant violations of the Uzbek legislation have been made in the spheres of currency, customs and fiscal regulations.

Particularly, the joint venture didn’t accomplish mandatory selling of currency proceeds and it has overpriced the customs value of imported goods. Besides, the prices to Uzmetal Technology Joint Venture products have been understated in comparison with the ones on the world market to these products. Due to the low prices to exported products, the Uzmetal Technology Joint Venture received approximately 4 billion and 680 millions soums less during its work. Moreover, due to understated prices for exported goods by the joint venture, taxes and other compulsory payments over 3 billion soums were unpaid to the state budget.

The claim filed by Uzbek founders to the commercial court with a request to exact the share of dividends owed to them, unpaid as a result of illicit actions by the Israeli company was met. Unhappy with such a ruling, the Metal-Tech Ltd has brought a claim against the Republic of Uzbekistan at the ICSID.

The International Centre for Settlement of Investment Disputes which held its hearing in Washington, D.C. had ruled that the examination of the Israeli company’s claims didn’t fall with the jurisdiction of the tribunal and dismissed all its claims.

There is a hope that this negative example of investment cooperation will not appear again and dishonesty of foreign partners will not discredit Uzbekistan’s business reputation as a country seeking to attract foreign investments for further growth of national economy by modernization, technical and technological retooling of production.

Uzbekistan is committed to observing foreign investor right and legitimate interests, granting privileges and preferences to them. However, it will not accept the gross violations of contract obligations on business partnership.

Leave a Comment